Despite doom and gloom in Republican talking circles, the overall jobs data is right on track in reflecting a rebound in economic activity. Just released unemployment numbers show the lowest number of monthly job losses in two years, down to 11,000.
When Republicans handed over the Presidency to Barack Obama in January 2009, the monthly losses were 741,000. If the automobile companies had folded, as they would have in the Spring without government support, another million-plus people would have been thrown out of work, sending the monthly number over 1,000,000 for several months in a row.
It would have been preferable if private business activity had caused employment to improve. But the financial freeze robbed businesses of their confidence and their financial capital, so businesses have shedded jobs, delayed plans, and closed down.
The government rescue gave money to states to stop layoffs at schools and police departments. In other ways, from the Fed’s low interest rates to funds for infrastructure, education grants, promoting green technology and the like, the government injected money into the economy. Job losses in September of this year were down to 139,000 and in October, 111,000. The stimulus is working, despite Representative Boehner’s (R-Oh) claims of failure.
Jobs are a lagging indicator, which means that new business planning, funding and activity happens first, and then the hiring of employees occurs many months later after confidence improves, and opportunities require new staffing. The growth rate for the economy as a whole was around three percent for the quarter ending in September, in line with the positive growth rates that the U.S. hopes to sustain for long-range growth, although more is desired now to make up for negative growth during the recession.
The goal is for employment to come roaring back and for private business to take over for public support of the economy. However, businesses large and small are still shell-shocked by the financial freeze and destruction of wealth that it wrought. They must also adjust to lower spending as consumers behave more responsibly and unemployment remains significantly elevated. Fortunately, there is still a lot of stimulus money left to power infrastructure projects before the handoff to the private sector takes place.
The government has done the lion’s share. It still needs to implement sound financial reform legislation, giving the public and financial industries confidence in a sound and fair system. In addition, health care reform in the public and private sectors could free up wasted money for productivity in other areas that serve American business, such as exports.
Insurance regulation and universal coverage, already contained in proposed legislation, will spread the burden of costs more equally. However, systemic overspending in health care robs families of wages and businesses of profits that could be put to better use. Following evidence-based medicine rather than custom and practice and market-driven medicine could go a long way to giving us more for our money. Malpractice reform, consistent with evidence-based medicine, would also eliminate waste.
Look for December or January employment numbers to finally turn positive and fourth quarter growth to remain healthy. This will be welcome news to the unemployed and businesses, and should give the country more confidence that we are, in fact, on the road to recovery.
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December 5, 2009 UPDATE: The following graph is current: Click here
December 8, 2009 UPDATE: Bloomberg Economics podcast of Dec. 7, 2009. Tom Keen’s interview with Steven Wieting, Managing Director of Economics and Market Analysis reflects on the jobs data and recovery. It’s technical, but provides some thoughtful observations.
December 21, 2009 UPDATE: More evidence of recovery in the labor market